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College application deadlines have a tendency to come up fast. But the process of preparing for college typically begins much earlier than senior year.

Plenty of students prefer to get ready as early as their junior year of high school—in an effort to strengthen their eventual college applications (and make the process more manageable).

For those interested in college, some years of high school carry more weight — especially, the junior year. Colleges often look more closely at grades and achievements from students’ junior years when evaluating who to accept.

After all, that third year in high school is the last full academic calendar a college can view before students apply.

So, approaching junior year with a clear action plan may even give applicants a leg up on admission into their dream college. Compiling a junior year of high school checklist could help students to tackle this vital year with more drive, confidence, and focus.

Here’s an overview of why junior year of high school is so key and some strategies for staying focused while preparing to apply for college.

Why Junior Year Is Important

Junior year of high school can be especially impactful for strengthening a student’s college application. It’s the last school year that universities can look at in full before applications are due during senior year.

As a result, many admissions committees pay particularly close attention to grades and extracurricular activities from the junior year of high school.

The third year of high school can feel overwhelmingly for a few reasons:

•   Class difficulty levels are often higher than earlier years.
•   Students can begin studying now for the SAT and ACT. (It’s possible to take these exams in the spring of junior year, affording juniors a chance to retake them during the fall of senior year.)
•   Upper-class students can take on numerous extracurriculars and a part-time job.

To help make junior year a lighter lift, it can be a good idea to enter into it with a checklist in hand. This can help students see more success when college acceptance letters are sent out the next year. What follows are some helpful things students may want to keep in mind to make more out of this critical year.


💡 Quick Tip: You’ll make no payments on some private student loans for six months after graduation.

Getting Involved in Extracurriculars

To strengthen their college applications, many juniors opt to get more involved with organizations or activities they care deeply about. Being involved in extracurriculars doesn’t have to feel like a chore.

Extracurriculars that might stand out on a college application range from clubs to student council, from athletic endeavors to volunteering. There’s no one-size-fits-all way for students to be engaged in school or in their communities.

Many high schools host a variety of clubs that students can join. Juniors could choose one or two they’re really passionate about, allowing these extracurricular activities to serve as a break from hitting the books (all while still fleshing out their college application profile).

Staying Focused

Another potential way to increase focus is to keep a planner. It seems simple, but in today’s technology-driven age, it’s easy to forget how valuable writing big dates or goals down can be.

With seven dates available to take the SAT, and seven or more different dates available to take the ACT, it’s not hard for busy students to lose track of when to study for and schedule their college admission tests.

Once a test date has been chosen, students can mark it down in their printed planner. It’s then possible for a high school junior to work backwards, planning out practice tests and pencilling in study sessions during the build-up to the testing date.

The simple act of writing things down can make them easier to remember, so some researchers suggest jotting down key dates first in a physical planner before then adding them to a digital device or calendar.

Recommended: ACT vs. SAT: Which Do Colleges Prefer?

Making a Junior Year Checklist

In addition to writing down important dates, some students may benefit from making a personalized junior year checklist. Some tasks that could be included on such a list are:

•   Studying for major tests, like the SAT or ACT
•   Joining extracurricular clubs or organizations
•   Researching different colleges and universities
•   Getting familiar with the format of college applications

Once a checklist is drafted, students might then make to-do lists under each sub-category. The planner could be used in tandem to help students stay on top of these goals and deadlines.

Designating a Study Space

Creating a dedicated space for studying can also improve a student’s focus during a jam-packed school year. Many high schoolers opt to designate a comfy space at home, where they may then concentrate on their studies. It’s even possible to give this study space a personal touch — decking it out with school supplies, keeping it clutter-free, and decorating it with inspirational photos or personal items (like a magnet from one’s dream college).

Creating a dedicated study space, some claim, could both make recalling information easier and studying more effective.

Remembering to Reward Accomplishments

Busy high school juniors might want to remember to reward major accomplishments during this high-stakes year. Once important dates and tasks are mapped out (and scheduled), students could make another list of potential fun rewards to enjoy, once an outlined goal is met. Aced those finals? Binge on some light TV. Finished the SAT practice exam? Download that new game everyone’s been playing.

It may also be helpful to recall that an overly hectic junior year can increase students’ feelings of stress, possibly making it harder to accomplish big goals. Burnout is likely easier to avoid when students carve time out for regular breaks.

Strengthening that College Application

There’s a multitude of ways for juniors to strengthen their eventual college applications. Choosing which tasks to focus on can be the hard part.

Some juniors add volunteering to their schedules this year. Certain volunteer opportunities have age restrictions, which can make them easier for upperclass students to apply for. Similar to the earlier at-school clubs, many juniors opt to volunteer with non-profit organizations or institutions they’re passionate about.

To possibly stand out more on the college application, it may also be helpful for juniors to find a volunteer opportunity in the field they’re hoping to pursue as a career some day.

For instance, a student interested in medicine might seek out opportunities in a local hospital (so they could learn firsthand about what working in that environment and evidence their commitment to a given field of study.)

Recommended: College Planning Guide for Parents

Getting a First Job

Junior year could also be a good time for students to get their first part-time job. Many states allow young people to begin working once they’re 16 years old. If a student can find a job that’s easy to get (and doesn’t distract from academics), work experience can be one more experience to highlight on a college application down the road. Holding a part-time job at a young age might demonstrate skills, such as time-management and personal responsibility.

Moreover, there may also be unique opportunities available to upperclass students at their individual schools. It’s common for special electives or programs to open up to older students — things like, working on the school yearbook, interning for credit, or volunteering on or off site.

Recommended: Am I Eligible for Work-Study?

Financing College

Earning admission is just one piece of the going-to-college puzzle. Once accepted, many high schoolers have to wrestle with how to pay for college. For parents, saving up for a child’s college years is something they may want to start while their student is much younger.

What are some options for financing college? Some ways to pay for college include need-based grants, merit or affinity scholarships, federal student loans, and private student loans.

Some grants, such as Federal Pell Grants, are disbursed by the U.S. government to those who qualify. Grants, unlike loans, do not typically have to be repaid by the student. Scholarships are frequently merit-based, meaning they’re often awarded based on a student’s academic, athletic, or community-based accomplishments.

Many high schools and colleges publish lists of financial aid resources available to eligible undergraduates. These lists are one starting place to begin searching for potential scholarships or grants.

So, it may be worthwhile to check with a guidance counselor or on a college’s official financial aid web page (to see what resources have already been compiled).


💡 Quick Tip: Parents and sponsors with strong credit and income may find much lower rates on no-fee private parent student loans than federal parent PLUS loans. Federal PLUS loans also come with an origination fee.

The Takeaway

Junior year can play a vital role in preparing students to vie for college admission. There’s a lot to keep track of this year — from juggling academics alongside extracurriculars to figuring out how, eventually, to pay for college (once accepted).

Loans are another common way to help pay for college. There are both federal and private student loans. Federal loans are offered by the U.S. government to those who qualify. It’s important to note that federal loans can come with certain baked-in benefits (such as forbearance or income-driven repayment options) not always guaranteed by private lenders.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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The process of looking for a job is complex, as is the hiring process that can follow. You may be psyched to be offered a position but then learn that a credit check is part of the vetting.

This step can be concerning for some prospective employees, as it makes them wonder why their financial history matters, how their credit will look, and whether it could be considered a strike against them.

Not all companies run credit checks, but if you are negotiating with one that does, here are answers to your questions about this procedure, including:

•   What is a credit check for employment?

•   Why do employers check credit?

•   What are employers looking for when they check credit?

•   What requirements and limitations govern credit checks?

What’s a Credit Check for Employment?

Pre-employment credit checks happen when a company uses a third-party company to check a candidate’s credit history and see their past approach to consumer debt.

Sometimes, what’s called a background check may include a credit check as well as a scan for criminal activity and is a tool that helps the potential employer make a decision about whether or not to hire the candidate.

Credit checks are more commonly used in industries that deal directly with money, like accounting, banking, and investing, but any employer could decide to run pre-employment credit checks.

How Does a Pre-Employment Credit Check Work?

Here’s how a pre-employment credit check works: Once the job offer is on the table, an employer will solicit a third-party provider to run a credit check for employment purposes that features the following information about the potential employee:

•   Full name and previous names

•   Current address and past addresses

•   Social Security number

•   Incurred debts such as credit card debt, car loans, mortgages, student loans, and personal loans, including the full payment history on each account and any late payments.

One thing pre-employment credit checks cannot include is the potential employee’s date of birth because it could allow their age to be used against them in a discriminatory manner.

What Do Employers See on Credit Checks?

You’re likely curious to know exactly what a prospective employer could see when they peek at your credit. Here’s the answer.

What They See

A potential employer will only see some aspects of your credit report. Typically, they will access:

•   Your name and address

•   Your payment history

•   What credit accounts you hold and your available credit

•   Information on your work history that you have reported

•   Any bankruptcies or liens.

What They Don’t See

Next, consider what they don’t see when accessing your data as part of a credit check:

•   Your credit score

•   Your income

•   The account numbers connected to your credit accounts

•   Medical bills

•   Details such as your age, marital status, race, or ethnicity. These are protected as part of discrimination protection (more on that in a moment).

And also worth noting: There is a seven-year restriction on certain kinds of background information for positions that pay less than $75,000 per year, including that relating to bankruptcy and liens.

Federal Limits on Pre-Employment Credit Checks

The Federal Trade Commission’s Fair Credit Reporting Act (FCRA) is federal legislation that protects the personal information collected by consumer reporting agencies and ensures that any entity that uses the information notifies the consumer of adverse actions taken on the basis of the report.

Here are a few of the FCRA requirements for employers who run a background credit check for employment on potential or current employees:

•   Employers cannot legally obtain background information on an employee “based on a person’s race, national origin, color, sex, religion, disability, genetic information (including family medical history), or age (40 or older).”

•   Employers must inform employees in writing of their intention to perform a background check or credit check, indicating they might use the information to make decisions about their employment.

•   Employers must then get written approval from the applicant or employee to perform the background check and certify to the third-party provider that the employer:

◦   Notified the applicant and received their permission to obtain a background report.

◦   Fully complied with FCRA requirements.

◦   Will refrain from discriminating against the applicant or employee or misusing the information as a violation against Equal Opportunity laws or regulations.

•   Before taking any adverse employment actions against an applicant or employee, employers must provide them with a notice that includes a copy of the report itself and a copy of A Summary of Your Rights Under the Fair Credit Reporting Act.

•   After taking any adverse employment action, the employer must inform the applicant or employee:

◦   Of the name, address, and phone number of the company that conducted the background check, and the fact that it did not make the final decision.

◦   That they were rejected because of information in the report.

◦   That they reserve the right to dispute the report’s accuracy or completeness and receive a free report from the same reporting company within 60 days.

State and Local Limits on Pre-Employment Credit Checks

For the most part, many US states allow employers to obtain credit reports in the hiring process in a fair and equitable way. Certain states, however, restrict how the obtained information can be used. Those states include California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington, as well as the District of Columbia. Delaware has a law that prohibits these checks by public employers until an applicant has been offered a job conditionally.

Several other states have legislation pending that could prohibit or place restrictions on credit inquiries for employment.

Certain localities also have prohibitions and restrictions on pre-employment credit checks, including New York City, Philadelphia, and Chicago.

What Are Employers Looking for in Your Credit Report?

So, if they’re digging deep into your credit history to determine whether or not to hire you, what exactly are employers looking for in a credit report? Here are a few things that could help them with their hiring decision:

History of Handling Money

Particularly in cases where a potential employee would be handling large amounts of money on behalf of a company’s clients (like an investment broker or a banker), a pre-employment credit check can help ensure trustworthiness and the ability to keep their funds safe and secure.

If there’s a history of mismanaging money in a credit report, it can be seen as a red flag for potential employers who are concerned the candidate would mismanage the business’s money.

Decision-Making Ability

Even in cases where a potential employee isn’t directly handling money, certain dings in their credit history can still signal a red flag to employers. Negative credit events like foreclosures, numerous bank account closings, late payments, high credit utilization rate, or liens against a job applicant can be seen as signs of negligence or carelessness that they don’t necessarily want in their workforce.

Potential for Criminal Activity

Another reason for running a background credit check for employment is to assess whether a job candidate could be a risk for criminal behavior. For example, if a potential employee has several large debts, it could leave the employer wondering whether they’d be tempted to embezzle or commit fraud to cover their own debts and financial issues.

Recommended: How to Check Your Credit Score for Free

Anticipating an Employer Credit Check

Being prepared in advance of an employer credit check can sometimes be half the battle.

Here are a few steps you can take before the job interview even begins:

1.   Obtain a copy of your credit report as soon as you can. Wondering how to review your file? You’re entitled to one free copy of your credit report per year from all three of the major credit bureaus (Equifax, Experian, and TransUnion).

  You can get it by visiting AnnualCreditReport.com . Allow plenty of time to look into any errors and file disputes, if necessary.

2.    Address any errors on your credit report. If you notice any discrepancies when you pull up your free credit report, you can provide a brief statement to dispute the findings and get on top of it before the potential employer sees it. You can also write statements that explain the cause for a discrepancy like a late payment. For example, perhaps you were late on a mortgage payment because of a disability or illness.

3.    Provide your written permission for the employer to run the credit check. This way, you’re fully prepared for the next step in the hiring process and have done everything you can to put your best foot forward.

Does an Employer Credit Check Hurt Your Credit?

You may wonder, Can an employer background check affect your credit score? Typically, the answer is no. These kinds of inquiries are known as a soft pull versus a hard pull. It won’t take points off your credit score the way a deeper inquiry (from, say, a credit card company you applied to) could.

Why Employer Credit Checks Are Controversial

Some employers may feel that credit checks provide them with additional important information on a candidate before they make a hire.

However, the controversy around employer credit checks is this: Others would say that a credit report has no impact on a person’s ability to do most jobs.

They also feel that delving into a credit report could reflect negatively on minority job seekers and others who may not have as positive credit history. In this way, accessing credit information could contribute to discrimination.

The Takeaway

A credit check for employment purposes can throw you for a real loop in the job interview process. If you’re prepared for an employment credit check in advance, there’s a good chance you can present your case in a clear and compelling manner that resonates with the employer.

Checking your credit reports is the first step to knowing what information a potential employer might access. After that, handling your finances responsibly with the right banking partner can help get you on the right track.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What do employers look for when doing credit checks?

When an employer does a credit check, it is typically to assess how reliably a candidate handles financial responsibilities, decision-making ability, and possible propensity towards money-related crimes.

Why is an employer asking for a credit check?

An employer may ask for a credit as a way of gaining more insight into your financial habits and how well you make decisions. If they see high levels of debt and late payments, they might think twice about your abilities, especially in a financial position.

Can a job offer be rescinded due to bad credit?

It is legal in many states for a job offer to be rescinded after a credit check. Your prospective employer might see too many signals that your have poor decision-making and money-management skills.

Photo credit: iStock/ljubaphoto

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SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

This article is not intended to be legal advice. Please consult an attorney for advice.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Typically, a savings account is a safe, insured place to sock away your cash and earn some interest. You usually don’t use this money for spending, as you do with a savings account, nor is it necessarily the growth vehicle of investments, which also brings risk.

A savings account can be a good place to store funds for future goals. This could mean a short-term goal, like saving for holiday gifts or a beach rental next summer. You might also use a savings account for longer-term goals, like the down payment on a house.

Read on to learn about more, including:

•   What is a savings account?

•   What are the different types of savings accounts?

•   How does a savings account work?

What Is a Savings Account?

Savings accounts can be a great way to diversify a financial strategy. A person might not want to put all their money into a savings account, but a savings account can complement their larger financial plan.

Compared to investments, savings accounts can be a safer spot to put cash away for short-term savings. And, savings accounts typically earn more than checking accounts.

Savings accounts set themselves apart because:

•   They earn interest. Unlike many checking accounts, savings accounts are interest-bearing — that means the bank will pay an annual percentage yield (APY), based on the money in the account.

•   They’re insured. The money in a savings account is insured by the FDIC (Federal Deposit Insurance Corporation). The FDIC was established in 1933 after the stock market crashed. When an account is insured, it guarantees that the customer will be able to get their money even in the rare event that a bank goes out of business. Savings accounts in FDIC-insured institutions are generally a safe place to keep cash.

Savings vs. Checking Account

Are you wondering what the difference is between a savings vs. a checking account?

•   A checking account is designed to be the hub of your financial life, with money flowing in and out.

•   Typically, you will earn no or low interest with checking accounts, but you will not face transaction limits.

•   With a savings account, money typically stays in the bank (or most of it). Since the bank can then use some of it to meet other business needs (such as loans to other clients), it pays you interest for the privilege of using some of your money in this way.

•   Savings accounts typically do pay interest, though it will vary depending on the kind of account and perhaps how much you have on deposit.

•   With a savings account, you may be limited to six outgoing transactions per month, depending on the financial institution. If you go over that number, you may be charged, have your account switched to a checking account, or even have your account closed.

How Does a Savings Account Work?

If you’re wondering, “How do savings accounts work?” know this: They usually work by you depositing funds into a savings account. The bank, as mentioned above, expects you to keep the funds there, where they can use some of the money to make, say, loans to others.

For the privilege to use your money in this way, the bank pays you interest. So, as your money sits there, it is growing. This can help you reach your financial goals sooner.

💡 Quick Tip: Typically, checking accounts don’t earn interest. However, some accounts do, and online banks are more likely than brick-and-mortar banks to offer you the best rates.

How to Use a Savings Account

Generally, a savings account is used for short-term savings goals, like an upcoming vacation or large purchase. This type of account is generally used to save or plan for expenses that don’t come up on a daily basis.

If you have multiple short-term savings goals, you might choose to open multiple savings accounts. You don’t have to open up an account for every goal, but keeping separate savings accounts could make budgeting easier. Watching balances grow could be an excellent motivator to keep saving.

On the other hand, financial minimalists might be overwhelmed by juggling multiple account numbers and balances. In that case, having more than one savings account might cause more confusion than clarity. The important thing is knowing how much you are saving and where.

Some specific reasons a person might open a savings account (or two):

•   An emergency fund. Emergencies crop up when least expected. That means the money always needs to be liquid and available. A savings account can be a good place to build and keep an emergency fund.

•   Short-term saving goals. Many things could fall under this umbrella, including upcoming travel, saving for a downpayment on a home, or putting aside funds to purchase a car. A savings account can be a good place for savings goals you hope to accomplish within the next few months or a year.

These are just a couple of the ways someone could use a savings account when it comes to personal finance.

There’s no one right way to use a savings account, and, depending on a person’s preference and goals, they might keep one or multiple savings accounts.

How Much to Keep in a Savings Account

How much to keep in a savings account will vary depending on a variety of factors, which may include your income level, your expenses and cost of living, and your financial goals.

For starters, experts advise having the equivalent of three to six months’ worth of basic living expenses in an emergency fund, as noted above. This can be a valuable cushion if you have unexpected bills or a job loss.

Otherwise, financial experts typically advise that you save 20% of your pay. Some of this might go towards investments and some might go into a savings account (or a couple of them) at the bank. It’s a personal decision.

Pros of a Savings Account

Savings accounts yield lots of benefits for their users. Account benefits vary by financial institution, so customers might want to check the fine print for rates and details.

•   Earned interest. How does interest on a savings account work? As money sits in a bank account, it makes more money. The bank pays you a rate because your money provides a service to the bank. In a nutshell, customers open a savings account and deposit cash there, earning some interest. The bank takes that cash and loans it out to other customers at a higher interest rate. But don’t worry, savings account holders can access their savings at any time.

•   Easy access. A savings account is typically more liquid than an investment account, making it a good candidate for short-term savings goals, since account owners can easily and quickly access their money. Typically, a customer can transfer the funds online with the click of a few buttons.

•   Low risk. Since savings accounts are liquid and easy to get to, they’re generally regarded as low risk. Savings accounts don’t have the risk associated with investing. If a person is saving up for a big purchase in the next year or two, they might want to consider keeping the money in a savings account, where they can access it easily without the concern of market volatility.

💡 Quick Tip: Want a simple way to save more everyday? When you turn on Roundups, all of your debit card purchases are automatically rounded up to the next dollar and deposited into your online savings account.

Cons of a Savings Account

While savings accounts have their fair share of benefits, they also have a few drawbacks. Depending on a person’s needs and savings goals, these accounts might not always be the best fit. Here are a few things to keep in mind while mulling over where to deposit extra cash:

•   They might require a minimum balance. Some savings accounts require a minimum balance, depending on the financial institution. That means the account can’t fall below a certain amount. If it does, there could be a fee or extra charges headed the account holder’s way.

•   Limited transactions. With the benefit of higher-than-average interest comes the drawback of potentially limited savings account withdrawals, deposits, and transfers. The Federal Reserve lifted its rule that banks must penalize members who make more than six transactions per month from their savings accounts in 2020. However, banks can still penalize you (with fees) if they want to. It’s a good idea to ask your bank about its policy before making more than six transactions in a month.

•   Setup fees. Depending on the financial institution and type of account, there could be fees associated with opening a savings account. This varies by institution.

•   No tax advantage. If you are thinking about saving for your future, you might get tax breaks with a different kind of retirement vehicle, such as a 401(k) or an IRA.

Types of Savings Accounts

While they follow the same general rules, not all savings accounts are built the same. What follows are some different types of savings accounts you’ll likely find available.

1. Traditional Savings

Consider this a beginner’s savings account. A traditional savings account is offered by most financial institutions, and typically comes tied directly to a checking account. A traditional savings account typically will have a low-interest rate compared to other savings accounts.

2. High-Yield Savings

As the name suggests, a high-yield savings account will have a higher yield than a traditional savings account. The higher APY may come with caveats that vary by bank, such as requiring a large initial deposit and/or monthly balance. The bank might also be more likely to limit transactions to six per month.

3. Online Savings

Online-only banks don’t have to support expensive brick-and-mortar branches, which can enable them to offer annual APYs that are higher than traditional savings accounts. These online savings accounts also tend to have low initial deposit requirements and typically don’t charge monthly maintenance fees.

Alternatives to Savings Accounts

There are other short-term savings options that don’t involve investment risk. Here are a few alternatives.

Certificate of Deposit (CD)

A certificate of deposit (CD) is similar to a high-yield savings account when it comes to interest rates. However, when a person sets up a CD, they have to commit to keeping it there for a certain amount of time, and early withdrawal can lead to penalties. As a general rule of thumb, the longer the length of the CD, the better the interest rate.

Money Market Deposit Account (MMDA)

A money market deposit account (MMDA) is often similar to a high-yield savings account, but account holders typically need to meet requirements and adhere to the transaction limits to see the benefits. These may include a minimum balance, and a limited number of transactions per month (including deposits, withdrawals, and transfers).

Cash Management Account

A cash management account (CMA) functions as both a spending and a savings account and often offers a higher interest rate than a traditional savings account. With many CMAs, account holders can write checks, pay bills, transfer funds, and make deposits. CMAs are offered by both brick-and-mortar and online financial institutions.

What to Consider When Choosing a Savings Account

When choosing a savings account, consider the following factors:

•   Interest rates: There is considerable variation, and your money might earn a fraction of a percent or several percentage points. It can be wise to shop around for the highest rates.

•   Fees. Some financial institutions may hit you with fees, such as monthly account maintenance fees. Ask in advance before signing up.

•   Minimum opening deposit and balance requirements. These can stipulate that you put and then keep a certain amount of money in the account. Make sure you are aware of the guidelines and can adhere to them.

•   Transaction limits. As discussed above, some banks place limits on the number of times you can pull money out of your savings account. Know whether your account would have penalties if you exceed the number.

•   Accessibility. You want to be sure you can reach your bank and your money when you need to. Depending on your banking and lifestyle, this could mean a local vs. a national bank, or an online bank vs. a traditional one.

Opening a Savings Account

A savings account is a bank account that lets you store your money securely typically while earning interest.
Using a savings account separates money you intend to use at a later date, say for a large purchase or upcoming event, from everyday spending money that is kept in your checking account.

High-yield savings accounts and online savings accounts often offer higher interest than traditional savings accounts.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

How exactly does a savings account work?

A savings account is typically a secure, insured way of keeping your money and earning interest.

Can you withdraw money from a savings account?

Yes, you can likely withdraw money from a savings account. Check with your financial institution if they have a monthly limit regarding the number of withdrawals or whether there are fees if your balance falls under a certain amount.

Is a savings account worth it?

For many people, a savings account is a worthwhile financial product. It keeps your money secure and pays some interest as you save towards goals, whether that’s an emergency fund or a travel fund.

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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Whether you’re leaving home for the first time or enrolling in your local community college, you might have a lot of misconceptions about the college experience.

So, what is college really like? Keep reading to learn about some of the myths and realities of being a college student.

Common College Myths

Pop culture has altered how we view the quintessential college experience, and though some of these myths are rooted in some level of truth, many don’t hold up nowadays.

College myths can stoke anxiety for incoming students. So let’s look for truths.

Myth 1: Most Students Graduate in 4 Years

Although traditionally students head to college for a “four-year degree,” many of them take more than four years to graduate. In reality, only about 33.3% of students attending public colleges and universities earn a bachelor’s degree within four years.

Nearly 60% of students at public universities and colleges take six years to graduate.

There are lots of legitimate reasons it can take students more than four years to get a degree. Some may change their major and need extra classes to meet their new major requirements. Others may take on a minor or a double major that requires extra classes. Adventurous students might take time to study abroad, which could potentially slow their progress.

Others may decide to transfer schools or might have to work to pay their way through school, which could lead to finishing required classes at a slower pace.

A student may simply need more time to master the coursework. Taking your time to make sure you get the most value from your education and accomplish everything you want matters more than following a strict timeline.


💡 Quick Tip: Some lenders help you pay down your student loans sooner with reward points you earn along the way.

Myth 2: Your Major Will Determine Your Career Path

Some students know exactly what career path they want to take and choose a major accordingly. Others may need more time to discover their passions and interests.

There is a misconception that you have to major in a subject that relates to your career path. Many degrees teach skills that can transfer to a variety of fields.

Philosophy and history degrees can teach perspective. English literature degrees can enhance the art of critical thinking. Majoring in graphic design may lead to a career in marketing.

The bottom line is, if you focus on the skills you learn while earning your degree more than the specific subject matter, you can apply those skills to many different career paths.

Myth 3: You Have to Live on Campus to Have the Full Experience

Here’s a fun fact for students who are debating whether or not they have to live on campus to get the full college experience: Only around 22% of university students live in on-campus dormitories. Living on campus can be convenient, but can also be expensive and a big step for students fresh out of high school.

Even if students don’t live on campus, they will still have access to on-campus resources and perks such as clubs, events, libraries, and gyms.

Choosing to live on campus is a personal decision and needs to be one made based on a student’s particular financial, social, and educational needs.

Recommended: How to Find Affordable Student Housing in Your College Town

Myth 4: No One Transfers From Community College

Around 30% of community college students end up transferring to a four-year school. Attending community college has multiple benefits worth considering. Students can receive a high-quality education for a fraction of the price by taking their general education classes at a community college. Taking these classes at a cheaper tuition price can give students more time and leeway to experiment with subject matter they are interested in.

Attending community college has multiple benefits worth considering. Students can receive a high-quality education for a fraction of the price by taking their general education classes at a community college. Taking these classes at a cheaper tuition price can give students more time and leeway to experiment with subject matter they are interested in.

For those who have their hearts set on prestigious universities, it can be easier to transfer to one of those schools from community college than it is to be accepted straight out of high school.

Some community colleges have deals with local universities that can guarantee admission to your dream school if you meet certain qualifications. It’s known as a transfer admission guarantee, or TAG.

In California, six University of California campuses offer guaranteed admission to students from all California community colleges who have completed at least 30 semester UC-transferable units.

And in Florida, state community college graduates with an associate degree are guaranteed admission to one of the 11 state universities (except to limited access programs, which call for additional admission requirements).

Major College Realities

If you’re looking for a dose of reality before you start college, consider these tidbits. Knowledge is power, after all, so it can’t hurt to know what to expect.

Reality 1: Anyone Can Get Help Paying for School

Let’s start with some good news. Almost any student can find help paying for college, no matter what their financial background is.

While students from more privileged economic backgrounds may qualify for less federal student aid such as grants, both colleges and private businesses offer a variety of merit-based scholarships and grants that students can apply for.

It’s worth considering all of your aid options before you foot your entire college bill by yourself.


💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

Reality 2: Follow Your Passions

You’ve heard it from your teachers, you’ve heard it from your parents, and chances are you’ve heard it from countless other adults who like to reminisce about the good ol’ days: Your time spent in college will be some of the best years of your life.

College is a unique time when young adults can follow their passions. Even if you choose a major that doesn’t align with all of your interests, there are many elective classes you can take and clubs you can join that will help you foster your passions.

Learn Portuguese, take a class in 3D printing, hit the stage for some dramatic arts, or simply explore the library archives. Take advantage of this special time in your life to learn more about what interests you.

Recommended: How to Get Involved on Campus in College

Reality 3: You Can Change Your Mind

You’ve known your whole life that you want to be a doctor. Or a lawyer. Or a beekeeper. Or so you thought. One of the many joys of college is that you have the time and space to learn and grow.

You may discover after two years of being a psychology major that the statistics classes you had to take were more interesting than your clinical psychology classes.

It’s never too late to switch majors (that extra year of sticking around campus will be worth it) or start interning in a new career field.

Some students may find that the college they chose while they were still in high school isn’t a good fit. Guess what? You can transfer to a new school if you wish. You can change your mind about what you want to study and what career path you want to take, too.

Reality 4: Partying Can Take a Toll

For some, college parties are a rite of passage. For others, they are stressful and distracting. If the party lifestyle is something you’re not interested in or is something you know you’ll get swept up in, it’s OK to stay home on a Friday night.

Focusing on your studies is why you’re at college, so don’t let peer pressure or societal expectations make you feel bad for prioritizing that.

Another Reality: Financing College

As mentioned, students can apply for scholarships and grants to help pay for their college education. But if a student needs a little more help in the funding department to supplement their college savings, grants or scholarships, chances are either they or their parents will consider student loans.

Students can apply for federal and private student loans. Federal student loans often have lower interest rates than private student loans do and don’t have to be paid back until a student graduates or leaves school. If you qualify for a subsidized federal loan, you won’t have to pay any interest on the loan while you are in school and for six months after you graduate.

Private student loan lenders may require the borrower to begin paying back the loans before graduation day. That said, private student loans can help with college costs that federal student loans may not completely cover.

If students consider private student loans, they should research each lender and review the terms and rates offered. Also keep in mind that private loans may not offer the same protections, such as income-based repayment plans, that come with federal student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

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SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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